Three Considerations For Drafting A Code of Business Conduct

Although the Securities and Exchange Commission does not require that a company adopt a code of business conduct and ethics, I would be very surprised to hear of an SEC reporting company that has not adopted such a code.  Item 406 of Regulation S-K requires a reporting company to disclose whether it has “adopted a code of ethics

Are Alternate Committee Members “Then Serving”?

A number of amendments to Delaware’s General Corporation Law took effect at the beginning of this month.  One of these changes was to establish a default quorum requirement for meetings of committees of corporate boards of directors.  New Section 141(c)(4) provides: A majority of the directors then serving on a committee of the board of

Who Signs The Bylaws?

I am occasionally asked who should sign the bylaws.  The question presumes that bylaws must be signed.  Although the California General Corporation Law requires that the original or a copy of the bylaws be available to shareholders (Section 213), it does not require that corporate bylaws be signed.  Indeed, it could be argued that the

Replacement Of Lost Stock Certificate Is Not An Internal Affair, But So What?

U.S. District Court Judge Edward M. Chen recently ruled that a stockholder could maintain an action under California Corporations Code Section 419 for replacement of a lost, stolen or destroyed certificate.  As just described, the ruling shouldn’t be a surprise.  Section 419 provides that if “a corporation refuses to issue a new share certificate or other certificate in

Suspended And Dissolved Corporation Still Defaulted

The story is straightforward; the legal ramifications are not: The plaintiff sued a corporation.  Before the lawsuit was filed, the Secretary of State had suspended the corporation and then the corporation was voluntarily dissolved.  The plaintiff effected service on the designated agent who happened to be an attorney.  The attorney didn’t notify either his erstwhile client

California, Delaware And Nevada Differ On Committee Composition

In this prior post, I compared the differing limitations on committee authority under California and Delaware law.  Today’s post focuses on differences in committee composition among California, Delaware and Nevada.  These are summarized in the chart below.  In this post, I’m referring to committees of the board of directors; these are committees that have the power to

Is Rescission Ever Legal?

Yesterday’s post concerned when a corporation’s rescission of the issuance of shares does not constitute a “distribution to its shareholders” as defined in Section 166 of the California Corporations Code.  I noted that one of the three conditions is that “it is reasonably likely that the holder or holders of the shares in question could

When A Share Rescission Is Not A Distribution

Section 166 of the California Corporations Code defines “distribution to its shareholders”.  Knowing what constitutes a distribution to shareholders is important because Chapter 5 of the General Corporation Law imposes various restrictions on such distributions.  Shareholders and directors may be liable when these restrictions are violated.  Cal. Corp. Code §§ 316 & 506.  Under Section

California And Delaware Corporate Law Differ In Many Respects, Including The Authority Of Committees

Both California and Delaware allow the formation of committees of the Board of Directors.  Both states also allow these committees to exercise the authority of the board, but with certain exceptions.  California, however, has far more exceptions than Delaware.  For example, California does not allow the board to delegate its authority with respect to the